DBRS Morningstar Confirms Ratings of Trillium Credit Card Trust II

DBRS Limited (DBRS Morningstar) confirmed the ratings of all outstanding notes (the Notes) issued by Trillium Credit Card Trust II (the Trust) as follows:

-- Credit Card Receivables-Backed Floating Rate Class A Notes, Series 2020-1 at AAA (sf)
-- Credit Card Receivables-Backed Class B Notes, Series 2020-1 at A (sf)
-- Credit Card Receivables-Backed Class C Notes, Series 2020-1 at BBB (sf) (collectively, the Series 2020-1 Notes)

DBRS Morningstar initially published its outlook on the Coronavirus Disease (COVID-19) pandemic’s impact on key economic indicators for the 2020–22 time frame in April 2020. DBRS Morningstar last updated the macroeconomic scenarios on March 17, 2021, in its “Global Macroeconomic Scenarios: March 2021 Update” at https://www.dbrsmorningstar.com/research/375376. For the rated Notes, DBRS Morningstar considered impacts consistent with the moderate scenario in the referenced commentary in its analysis.

The rating confirmations are based on the following factors as of January 2021:

(1) The Notes benefit from series specific cash collateral accounts that could build up to 5.0% of the initial invested amount. For the AAA (sf)-rated and A (sf)-rated Notes, credit enhancement is also available through subordination of 8.0% and 3.0%, respectively. The Series 2020-1 Notes benefit from excess spread of 19.7%, which has grown from 17.1% at issuance.

(2) The three-month average payment rate and monthly gross yield have remained strong and stand at 52.3% and 25.6%, respectively. The net loss rate has averaged 2.7% over the last 12 months. The portfolio comprises a large percentage of prime borrowers, who typically demonstrate a stronger ability to meet their credit card obligations because of their credit quality and tendency to have more financial resources and funding options. In addition, ongoing government support programs and previously offered lender relief programs have contributed to the strong performance of the portfolio.

(3) The receivables pool is a large, well-diversified portfolio composed of certain credit cards originated, managed, and designated by The Bank of Nova Scotia (rated AA and R-1 (high) with Stable trends by DBRS Morningstar).

The performance and characteristics of the Trust pool and the Notes are available and updated each month in DBRS Morningstar’s Monthly Canadian ABS Report. DBRS Morningstar conducts monthly stress testing of each rated class of Notes, and the results indicate that simultaneous declines in yield and payment rates as well as increases in losses would not result in a failure of the Trust to repay the Notes on a timely basis. The severity of the tests applied is commensurate with the respective ratings of the Notes.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodology is the Master Canadian Structured Finance Surveillance Methodology (August 31, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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